The Marketing Law in Australia - the Trade Practices Act of 1974 - Case Study Example

Executive Summary This paper the Marketing Law in Australia, that is the Trade Practices Act of 1974. It does so by examining and analyzing in detail the case of the ACCC v Waverley Woollen Mills Pty Ltd. It gives a background or history of the case and determines Why the ACCC took action against Waverley Woollen Mills. Furthermore it attempts to answer whether the ACCC should have taken action against Waverley Woollen Mills and the reasons for it. Lastly it also aims to understand if the sections relied upon by the ACCC are good laws which will protect the interests of the consumers. Various cases similar to Waverley Woollen Mills will be used to prove this particular point and establish that the Trade Practices Act’s main responsibility is to protect consumers. Marketing Law – Australia Waverley Woollen Mills Pty. Ltd., is a company based in West Melbourne in the Australian state of Victoria. Their business areas include mohair, wool, woolen blankets, travel rugs and wool filled bedding products. Waverley Woollen Pty. Ltd., supplies a wide range of products in Australia and overseas. These products are manufactured from wool, mohair and alpaca fibre. In the first half of the year 2009, Waverley Woollen Mills Pty. Ltd., gave an undertaking to the Australian Competition and Consumer Commission (ACCC), under S. 87B of the Trade Practices Act of 1974. The history and reason behind the undertaking are as follows. History and Background From the year 2004 to the first quarter of the year 2005, Saigon Wool Company based out of Ho Chi Min City, Vietnam, manufactured a range of woollen jumpers known as Work Wear Jumper for the Tasmania based company Blockmack Pty. Ltd. Approximately 16,540 woollen Work Wear jumpers were manufactured by Saigon Wool Company from wool fibre that was spun in Australia but woven in Vietnam. These jumpers were imported into Australia. In July 2005, Waverley Australia Pty. Ltd., purchased the assets of Blockmack Pty. Ltd., and in the process Blockmack transferred the ownership of the Work Wear jumpers to Waverley Australia as a part of this transaction. Once the assets were bought over and the ownership transferred, Waverly Australia began selling the Work Wear jumpers through its factory outlet and several of its retail stores in Tasmania and also through an unrelated company in the United States of America. In October 2008, Waverley Woollen Mills Pty. Ltd., purchased the business operated by Waverley Australia and thus assumed ownership of the remaining Work Wear jumpers. Between October 2008 and February 2009, Waverley Woollen Mills began selling the remaining Work Wear jumpers in its possession, from its factory retail outlet on the mill site in Launceston. The collar label on the Work Wear jumpers read “Product of Australia”1, openly describing the product as one that is made in Australia. The underside of the plastic packaging containing the jumper had a sticker attached to it, which read, “Product of Australia, Assembled in Vietnam.” 2 Following an investigation, the ACCC, which is responsible for enforcing the Trade Practices Act 1974, alleged that Waverley Woollen Mills Pty Ltd., had breached the sections 52, 53 (eb) and 55 of the Trade Practices Act, in representing the jumper as a “Product of Australia”3, when it was in fact manufactured in Vietnam. According to s. 52 Trade Practices Act 1974 (Cth), a corporation is not allowed to engage in misleading or deceptive conduct or conduct that is likely to mislead or deceive. Additionally, s. 53 (eb) Trade Practices Act 1974 (Cth), a company is prohibited from making false or misleading representation regarding the place of origin of goods.4 Based on the above two sections, it can be said that Waverley Woollen Mills is answerable to the ACCC, as they have falsely misrepresented the place of origin of the Work Wear jumpers sold by them. They have claimed that it is a product of Australia, when in fact it was made in Vietnam. Furthermore, according to s. 55 Trade Practices Act 1974, a person in trade is prohibited from engaging in conduct that mislead the public with reference to the nature of the goods, manufacturing process, characteristics or the suitability for their purpose. Here again Waverley Woollen Mills has breached the Trade Practices Act 1974, by misleading the public regarding the manufacturing process of the Work Wear jumpers. The fact that they have breached the TPA is further proved based on the test for representations that goods are a product of a country given in s. 65AC Trade Practices Act 1974. The first point in s. 65AC TPA states that a company claims that its product is made in a country when it uses words such as product of or produce of. This claim has been made by Waverley Woollen Mills in the label of its jumpers. However for a company to claim this, s. 65AC TPA gives two main prerequisites. Firstly, each of the significant ingredients or component of the goods must have that country as the origin and secondly, all of virtually all of the processes involved in the production or manufacture of the good must happen in the country specified. These two conditions have been breached by Waverley Woollen Mills Pty. Ltd., as the wool used for the jumpers was woven in Vietnam although it was spun in Australia. Since for a claim such as “Product of Australia”5, all products and ingredients have to be manufactured and processed in Australia, the claim made by Waverley Woollen Mills is considered false and misleading. Action Taken by the ACCC Following the investigation and on finding proof that Waverley Woollen Mills has indeed breached s. 52, 53 (eb) and s. 65 AC TPA, the ACCC called for the destruction of the remaining Work Wear jumpers and called for an undertaking to be given by Waverley Woollen Mills which stated that for a period of three years in trade or commerce, Waverley Woollen Mills will not represent any if its products as a product of Australia unless it satisfies the two prerequisites stated in s. 65AC TPA. Furthermore Waverley Woollen Mills was required to publish in its website, within one month of acceptance of this undertaking, a corrective notice admitting that it has falsely claimed that its Work Wear jumpers are a product of Australia. Justification of Action Firstly, I agree that it is justified for the Australian Competition and Consumer Commission to take action against Waverley Woollen Mills Pty. Ltd. This is because first and foremost the ACCC is the Australian Federal Government’s national agency dealing with competition issues in trading and is also the only agency responsible for the enforcement of the Trade Practices Act and the state and territory application legislation. As enforcers of the Trade Practices Act, they are entitled to take action against a company who has breached the act. Secondly being the only international agency to enforce the Trade Practices Act, the action taken by the ACCC is considered relevant also because the following statements holds good and is true for all kinds of misleading or deceptive conduct. Based on these statements the ACCC is entitled to take action against Waverley Woollen Mills. These statements have been suggested and elaborated on by Goldring (1998).6 First and foremost, intention and inadvertence are not considered to be relevant when determining whether a conduct is misleading or not. Goldring (p 230), says that the underlying rationale of s. 52 TPA is that liability is concerned with the real and potential impact of the conduct and not with the state of mind or intent of the person or corporation of engaging in that conduct. So irrespective of the intent, action will be taken upon persons or corporations engaging in misleading conduct. Also it will not benefit the corporation or person engaged in misleading conduct even if there is evidence that the conduct was engaged in inadvertently. Hence it will not aid Waverley Woollen Mills if they try and prove that there was no intention to deceive or if they proved that it was done inadvertently. They are liable for action by the ACCC irrespective of the intent. The second statement says that for a decision to be made if the conductive is deceptive or not, it is not necessary that the conduct must cause actual deception. Here like the previous statement the focus is on the actual impact of the conduct. This may not be true however, in certain situations as it may help the court decide if it must grant injunctive relief to the affected party. The third statement says that ascertaining whether the conduct has the capacity or tendency to be deceptive or misleading is sufficient when assessing whether a conduct is likely to mislead or deceive. According to s. 52 TPA, a company is not allowed to engage in a conduct that is likely to judge or deceive the public.7 This particular aspect says Goldring (p 231), can be determined by assessing whether the conduct had the capacity to mislead. This must be done by adopting criteria which are related to the habits of less sophisticated, gullible, ordinary customers. Here again, it must be assessed whether the statement “Product of Australia”8 has the capacity to mislead to decide whether it is likely to mislead. The fourth statement points out that the literal truth may be considered deceptive if it is not the whole truth. Goldring (p 235) says that in a variety of circumstances, failure to disclose pertinent information is considered as misleading conduct. With this as a context, it can be said that Waverley Woollen Mills is liable to allegations of misleading conduct as they have failed to inform the customers that the Work Wear jumpers were woven in Vietnam. The product claim on the label read “Product of Australia”9, which again is a false claim as it breaches the two main prerequisites of s. 65AC TPA. The last statement made by Goldring (p 238), concerns product claims and surveys. It says that traders who seek to convince or persuade their customers with product claims must ensure that their claims rely on sufficient support information. In the case of Waverley Woollen Mills Pty. Ltd., the claim “Product of Australia”10 not only lacks sufficient relevant information to support the claim. The information available aids in proving that Waverley Woollen Mills have in fact breached s. 64AC of the Trade Practices Act 1974. Since the above five statements hold good for the conduct engaged in by Waverley Woollen Mills Pty Ltd., it can be concluded that the ACCC is right in taking action. Being the agency to enforce the Trade Practices Act 1974, they have the necessity and the right to take action against Waverley Woollen Mills for the misleading and deceptive claim made on the label of their Work Wear jumper. Furthermore, the ACCC was trying to achieve a higher social purpose by taking action against Waverley Woollen Mills. If a competitor of Waverley Woollen Mills had carried out investigation and filed a case against Waverley Woollen Mills and taken relevant action, it would have merely served the purpose of the competitor. That is, the competitor would have caused the market share of Waverley to reduce and gained competitive advantage through that. However, action taken by the ACCC will ensure that Waverley Woollen Mills is not unfairly treated and the same will act as a lesson to other players in the market. It will ensure that no other player in the market makes false claims and misleading statements. It will ensure that there is a significant amount of fair play within the market and all traders and corporations continue to practice fair trade. Laws Relied Upon By ACCC Three major sections have been relied upon by the ACCC and breached by Waverley Woollen Mills, including s. 52, s. 53(eb) and s.55 of the Trade Practices Act 1974. As mentioned in the previous parts of this paper, s. 52 TPA states that a corporation in trade is not allowed to engage in conduct that is deceptive and misleading or is likely to be so. This law ensures that no company engages in unlawful or misleading practices that deceives or is likely to deceive the customer either when buying a product or service or after the purchase has been made. This particular section of the Trade Practices Act is most relevant to many fields of trade and commerce and many cases have been filed by the ACCC as well as other parties based on this section. An example of the usage of this section can be seen in the ACCC v Thorn Australia Pty Ltd (2004) FCS 157. Proceedings were instituted in the Federal Court in Perth, against the Radio Rental trading and it’s “Rent Two, Get One Rent Free”11 campaign made by Thorn Australia Pty Ltd in October and November 2002. The ACCC alleged that in the “Rent Two, Get One Rent Free”12 television commercial, Radio Rental did not disclose or sufficiently disclose that the advertised offer was subject to certain terms and conditions. The ACCC claimed that the terms and conditions in small print were not clearly legible or easily understandable and was displayed on screen for an insufficient amount of time. Following the trial, the court ordered an injunction restraining Thorn Australia Pty Ltd in its television commercial from failing to give due prominence to or give reasonable display time in a legible form. The ACCC sought declarations, corrective notices and other remedial orders, all of which were one in the interests of the consumers who were falsely mislead by Thorn Australia Pty Ltd.13 The ACCC has also relied upon s. 55 TPA. According to s. 55 TPA, a person or corporation shall not engage in a conduct that is liable to mislead the public with respect to the nature of goods, manufacturing process, the characteristics of goods, suitability of their purpose or the quantity of goods. False claims regarding the nature, characteristics or manufacturing process of goods can deceive the consumers and mislead them to believe differently about a particular product. This maw prevents the consumers from being mislead regarding product characteristics and nature of the product. Contravening of both s. 52 and s. 55 TPA can be seen in ACCC v Petersville Limited and Peters Foods Australia Pty Ltd (1997) 90/40 A. Petersville Limited and Peters Foods Australia Pty Ltd are trading as Nestle Dairy Products whose principle activities are manufacture and merchandising of dairy products. In May 1997, the ACCC became aware after investigation that Nestle Diary Products’ apricot and tropical flavoured Vitari brand fruit ice confections, represented nutritional information on the back panel of the packaging which claimed that the product contained no sugars in a given 100ml of serving. It was found by the ACCC that a serving of Vitari contains approximately 13.8 (apricot flavour) and 14.2 (tropical flavour) grams of naturally occurring sugar. The ACCC alleged that first Nestle Diary products had contravened s. 52 TPA by giving misleading nutritional information on the product packaging. Second, it alleged that by printing nutritional information that was liable to mislead the public regarding the characteristics of the product it had breached s. 55 TPA. Following this, Nestle Diary Products agreed to give an undertaking to the ACCC for the purpose of s. 87 B Trade Practices Act 1974, accepting a series of corrective terms and conditions. 14 Taking the above case as an example, it is easy for consumers to consume the particular confectionary based on the information that there is no sugar contained in one serving of Vitari. This can result in health hazards and harm the consumers. Hence it can be said that s.55 TPA plays a very important role in protecting the interests of the consumers and the ACCC’s reliance on this particular section is very relevant. The last section that the ACCC has relied upon is s. 53(eb) TPA, which states that no corporation engaging in the supply of good and services are allowed to make a false or misleading representation regarding the place of origin of goods. This section of the Act ensures that consumers are not mislead regarding the origin of the goods. Some customers may be induced to buy goods from certain countries more than others. Some other may have an aversion to goods produced in a particular country. In recent years, says Goldring (p 255), consumers in Australia have been encouraged to buy products that are strictly made in Australia with a view to encourage viability of local manufacturers and to increase employment. Making false claims regarding the place of origin of the goods may mislead consumers who are country conscious. This section of the Act is responsible for the protection of the interests of these consumers. A similar or rather almost same scenario as Waverley Woollen Mills can be seen in ACCC v Riviana Foods Pty Ltd (1997) 97/49 M. Riviana is a proprietary company and its business activities mainly revolve around food importing and marketing. Riviana packs and distributes Australian grown white long grained rice under the Mahatma brand. This Australian grown long grained white rice is sourced from the Ricegrowers Co-operative Limited in Leeton, New South Wales. The Australian rice crop harvested in the year 1996 was severely affected by drought and the yield was much lower than expected. To compensate for the loss and supplement the supply, Riviana imported long grain white rice from Thailand in September 1996. Between September 1996 and March 1997 Riviana imported 2.31 kilos of bulk rice and 546,000 kilos of pre packed rice. The white long grain imported in bulk was repacked by Riviana into 1, 2 and 10 kilo bags. The Mahatma brand carried the label, “Packed in Australia from Imported Rice”15. The pre packed rice carried the label, “Product of Thailand”16. In March 1997 Riviana sold and exhausted all supply of the Mahatma brand of rice as well as the pre packed rice. From late March 1997 to May 1997, Rviana repacked some of the bulk rice it had imported under the Mahatma brand carrying the label “Product of Australia”. 17 On investigation the ACCC found out this fact and alleged that by labeling the rice as a “Product of Australia” when in fact it was imported from Thailand, Riviana has engaged in conduct that was misleading or deceptive or likely to be so according to s. 52 TPA. Furthermore, it alleged that Riviana had breached s. 53(eb) TPA by falsely representing that the white long grain rice was a product of Australia when in fact it was imported form Thailand. Following enquiries, Riviana Foods Pty Ltd admitted to have contravened s. 52 and 53(eb) of the Act and gave an undertaking to the Commission for the purposes of s. 87B in order to address the concerns expressed.18 Another similar situation can be noted in ACCC v Julian Mark Wolfhagen (1997) 97/6H trading as The Tasmanian Honey Company. As part of his business activities Wolfhagen produces, purchases, packages and sells honey within Tasmani, interstate and overseas. Wolfhagen has printed the descriptive terms “Choice Tasmanian Meadow Honey”19 and “This quality honey comes from lush clover pastures of Tasmania’s rich dairy farmlands”20. In May 1994, Wolfhagen purchased six tones of South Australian Lucerne honey which had been sourced from a South Australian producer through a Tasmanian intermediary. Wolfhagen then packaged this honey with the descriptive terms stated above and sold them. He claimed that the two varieties of honey had similar standards and appearance. An investigation by the ACCC revealed these facts and the ACCC alleged that Wolfhagen has engaged in conduct that has mislead or deceived the consumers. Furthermore, the Commission also alleged that by using the descriptive terms on a different product Wolfhagen has breached s. 53(eb) TPA, and made a false representation of the place of origin of the goods in question. Following this Wolfhagen agreed to give an undertaking to the ACCC with a view to address the concerns expressed by them.21 Thus it can be concluded that the specific sections of the Trade Practices Act 1974 that the ACCC has relied upon to are good laws for the protection of the Australian consumers. Word Count: 3212 Bibliography Australian Competition and Consumer Commission. Public Registers. ACCC Website. Retrieved August 4, 2009. http://www.accc.gov.au/content/index.phtml/itemId/3673 Australia & Miller, R V (1994). Trade Practices Act 1974: Annotated Trade Practices Act. Law Book Company, 1994 Clark, E E & Livermore, J (1994). Australian Marketing Law. Law Book Co., 1994 Gillies, P & Selvadurai, N (2008). Marketing Law. Federation Press, 2008 Hurley, A & Wiffen, G (1999). Outline of Trade Practices and Consumer Protection Law. Butterworths, 1999 Read More